IRS to team with tax firms on fighting identity theft, fraud

WASHINGTON (Reuters) – The U.S. Internal Revenue Service said on Thursday that it was teaming up with tax industry firms to try to protect taxpayers from identity theft and tax refund fraud by, for instance, monitoring electronic tax return filings for telltale signs of trouble.

Tax-fraud identity theft is a widening problem. The IRS said in May that cyber criminals had illegally accessed tax return information for about 100,000 U.S. taxpayers since the start of the filing season in January.

Those breaches resulted in as much as $39 million in stolen funds. Identity thieves typically steal Social Security numbers and use them to file fake returns, then rake in the refunds.

To fight this, the IRS said it would review transmissions of tax returns filed online by looking at the time it takes to complete the returns and observing forms sent repetitively from the same Internet Protocol number, or Internet “address.”

To help identify cyber criminals, for the first time, tax industry firms will share aggregated analytical information about IRS filings. The IRS now only gets information from some firms, making it difficult to identify trends.

The collaboration is also intended to centralize information and data sharing between tax industry companies and law enforcement to improve investigation and prosecution of identity thieves.

The IRS said many of these changes would be ready for implementation in the 2016 filing season.

“Today’s action by the IRS is welcome news,” said Orrin Hatch and Ron Wyden, the top members of the Senate tax committee, in a joint statement after the agency’s announcement. “Over the past five years, we’ve seen a significant uptick in tax refund fraud … This must stop.”